Ever since Salesforce released its CRM tool on the cloud, SaaS products have only grown in strength. Cloud-driven products like Zoom, Dropbox, and Slack are now familiar brands even among non-technical business users. With SaaS companies projected to grow their revenues to over $370 billion by the year 2024, product-led growth has become a key “talking point” among SaaS product companies.
Brian Halligan, CEO of HubSpot talks about product-led growth (or PLG) as “the flywheel where customers are the main drivers that pull in prospects.” What is driving PLG in today’s SaaS market? Here are a few indicators:
- Nearly three in every five SaaS companies now offer a free version of their software tool, while one in four has a “freemium” version.
- New startups (at seed stage) are embracing the “freemium” model at twice the rate as compared to later-stage companies.
Effectively, product-led growth means that every business function influences the final product and is tied to its evolution. In essence, each function looks at how the product can drive greater customer usage, growth, engagement, and stickiness.
For successful SaaS companies, the PLG model is not just about “designing great product features” but requires a more complete approach towards high-quality product development. Let us see how in the following sections.
How Product development can support Product-led Growth
The customer experience (CX) is at the core of PLG. Software product users are moving from the “traditional” marketing-led product promotion to the “personalized” mode of product-led growth.
Here are 5 ways by which high-quality product development can support PLG:
- Focus on the end-user experience.
For a successful PLG strategy, SaaS companies need to make the end-user the “focal point” of all their development-related activities. Entrepreneur Eduard Klein talks about the importance of “allowing the product to guide the user through the onboarding” process, as well as the need for “user interfaces to be clean, intuitive, and personalized.”
Free product trials (or limited-period versions) are among the essential pillars of the PLG model. Along with great features, successful SaaS products are all about easy (or self-) onboarding, minimum waiting to get started, and minimum interactions with marketing or customer support teams. As part of the PLG strategy, focus on the overall CX and how a customer-centric product can deliver business value and develop an online community of end-users.
- Define business roles and responsibilities.
While the product development team is at the core of designing and developing successful products, the product-led growth strategy is defined by including other business functions in the process. For instance, the customer success team communicates with end-users and delivers feedback on what the product is lacking.
Similarly, the sales and customer success teams can focus on product-qualified leads who have shown ample in-product behavior and engagement. To this effect, SaaS companies must encourage collaboration among the entire team and define their roles and responsibilities to build a successful product.
- Implement Product Analytics.
Product analytics is all about delivering an exceptional user experience in the PLG model. Wes Bush of the Product Led Institute says, “product-led companies must continually track and monitor these usage patterns to understand whether users are accomplishing what they set out to.”
As their priority, SaaS companies must leverage product-related information to activate their customers and then build on brand engagement. The good news is that only around 20% of companies do not track user analytics in their products.
For instance, the instant messaging platform Viber found its users to be highly engaged with group chats. Using this data, the platform made them easier and more user-friendly, thus leading to a 10% improvement in customer engagement.
- Conduct continuous product audits.
As its aim, the product-led growth strategy is designed to deliver customer value. The focus is on meaningfully addressing user needs and evolving the product based on what is most likely to help users address their tasks while using the product. These are some of the questions that SaaS-based product companies must address as they transition to PLG.
Continuous product audits ensure that SaaS products deliver the value that their customers are looking for. As Liat Bycel of Airtable explains, customer engagement is all “about making sure that we’re decreasing the time to value that customers get when experiencing the product for the first time.”
- Align development around key metrics.
Essentially, this means that product companies must align their development around key metrics and foster an environment of continuous improvement. Selecting the right success metrics is a critical part of this process. For example, reducing the “Time to value” (or TTV) is crucial for users to onboard and activate the product faster.
Other key metrics include customer acquisition (or users signing up for a free trial or freemium plan), generated revenues (recurring revenue or average revenue for each user), and virality rates (or the number of active customers after a selected period).
By running regular product experiments, growth marketing and development teams are 2.6x more likely to drive continuous product improvements and improve user behavior.
How Technology partners can boost PLG
The growing competition and increasing hiring challenges within the SaaS industry mean that more product companies are finding it challenging to keep up with continuous product improvements and changing customer expectations. This is one reason why customer acquisition costs are on the rise for SaaS companies.
To counter these challenges, more product companies are partnering with technology providers to ensure that their products and services reach the maximum number of customers. How do technology partners enable product companies?
- Improve product integration with third-party tools and solutions.
- Reduce the GTM cycle involved in selling a product to the customer.
- Transform basic product “ideas” into finished products.
Be it using the Agile or DevOps approach, product companies are looking at innovative ways to build and release better products. Short for the Build-as-a-Service cloud model, BaaS platforms are now enabling SaaS companies to transform a “good” idea into “great” technology innovation.
Overall, technology partners, along with product integrations, can reduce the overall cost of acquiring and retaining a customer. Further, they can help in reducing development time and costs, leading to growth in the customer base.
By putting the customer at the center, SaaS companies have executed a paradigm shift in the way their products are being developed and marketed. Thanks to the success stories of companies like Slack, Zoom, and Dropbox, the product-led growth (PLG) strategy is here to stay. However, despite its numerous benefits, implementing a successful PLG strategy is challenging for product companies. This is where the right technology partner can play a crucial role in making the switch.
As a BaaS pioneer, Forgeahead has successfully enabled SaaS companies’ ramp up their product development using its expertise in DevOps and serverless computing. Here is a look at some case studies on how we have empowered our customers across industry domains.
Looking to implement the right PLG strategy for your product organization? Get in touch with us today.